Top 10 most-bought investment funds: July 2024

Last month, a global tech outage sparked by a software update from cybersecurity firm CrowdStrike Holdings Inc Class A (NASDAQ:CRWD) hit industries including aviation, healthcare and banking. Lina Khan, chair of the US Federal Trade Commission, said “these incidents reveal how concentration can create fragile systems”, according to a BBC report.

Terry Smith, manager of Fundsmith Equity, had a few things to say about tech and concentration in a July update to investors. Fundsmith Equity fell two places to become the eighth-most bought fund in our July ranking of the most-popular funds, according to the number of “buys” among customers.

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Smith explained how the concentration of returns in a small number of tech stocks negatively impacted the first-half performance figures for his global equity fund. He owns three of the so-called Magnificent Seven stocks, Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT) and Apple Inc (NASDAQ:AAPL), but, crucially, not chipmaker NVIDIA Corp (NASDAQ:NVDA).

Former Scottish Mortgage investment trust manager James Anderson this month told the Financial Times that he thought Nvidia might “reach a $50 trillion market cap in a decade”, but Smith is yet to be persuaded about the AI stock, explaining that “we have yet to convince ourselves that its outlook is as predictable as we seek”.

In Smith’s update to investors, which was reported on by my colleague Kyle Caldwell, the star fund manager said that in the first six months of 2024, nearly half the 17% sterling return for the S&P 500 index was down to Apple, Amazon.com Inc (NASDAQ:AMZN), Meta, Microsoft and Nvidia, but that the latter was responsible for 25% of the return. Smith explained that: “Without owning this stock, and indeed the whole five in at least an index weighting, outperformance was difficult to attain.”

Eighth place is the lowest position for Fundsmith Equity in our monthly top 10 rankings for as long as the ii editorial team can remember, yet many investors remain faithful to Smith’s £22.7 billion fund. For example, a participant in our DIY Investor Diary series explained his preference for Smith’s style of investing, which has a good long-term track record, despite the underperformance of the past three years.

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L&G Global Technology Index, which retained first place, was one of the top-performing funds in the second quarter of the year, according to number-crunching by specialist writer Douglas Chadwick.

The L&G pure-play tech fund, which can be owned for a yearly fee of 0.32%, boasts one, three and five-year total return figures of 32%, 54%, 165% respectively. These are heady figures, but holding this fund could spell trouble for investors who are overexposed to technology should there be a sharp correction.

At the tail end of June, investment experts, including Richard Hunter, interactive investor’s head of markets, wrote about “emerging signs that a slight rotation [away from tech] may have begun in US markets”. However, semi-conductor stocks, for example, rallied yesterday, according to ii’s head of investment Victoria Scholar, with Nvidia jumping by 13%.

The current second-quarter US earnings season has so far delivered updates from Magnificent Seven stocks Alphabet Inc Class A (NASDAQ:GOOGL), Tesla Inc (NASDAQ:TSLA), Microsoft, and Meta Platforms, with Apple and Amazon reporting today, and star stock Nvidia at the end of August. Meta, for example, reported quarterly revenue up 22% and its fourth straight quarter of profit growth above 20%, with both figures beating expectations.

Jupiter India, meanwhile, fell one place to fourth. The fund holds low-cost airline InterGlobe Aviation, telecoms firm Bharti Airtel, and tech firm HCL Technologies among its top 10 holding. It has a yearly ongoing charges figure of 0.99%.

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Douglas Chadwick has held the £1.8 billion fund for almost a year, but is closely monitoring three alternatives. Sam Benstead, ii’s fixed income lead, also recently considered other options for investors seeking exposure to the subcontinent and argued that “two strong rivals to Jupiter India are Stewart Investors Indian Subcontinent Sustainability and Pacific Assets (LSE:PAC) Trust, which are both run by Edinburgh-based Stewart Investors”. The latter fund appears on the ii ACE 40sustainable investment ideas’ list.

Royal London Short Term Money Market fund, up one to third place, currently yields 5.29%. The Bank of England’s decision to cut interest rates today from 5.25% to 5% will impact investors in money market funds, as the return they enjoy is linked to the base rate. Now the rate-cutting cycle has started, the yield will start to fall.

Low-cost multi-asset fundVanguard LifeStrategy 80% Equity held steady in second place, as did the 100% Equity version in seventh place, while the 60% Equity fund moved down one place to 10th.

July’s decisive general election victory for Labour failed to bring any UK-focused funds into the top 10 and low-cost global trackers made up the rest of the top 10, namely Fidelity Index World (up two places to sixth), HSBC FTSE All-World Index (static in fifth place) and Vanguard FTSE Global All Cap Index (up one place to ninth).

Top 10 most-popular investment funds in July 2024 

Source: interactive investor. Performance data to 1 August 2024. Note: the top 10 is based on the number of “buys” during the month of July.